Aboitiz-led Union Bank of the Philippines aims to grow its net profit by double-digits this year given the sustained expansion in its loan and securities books.
In a recent interview, Union Bank president Edwin Bautista said this year would likely be “very good” for the bank, driven by continued loan and securities growth and expansion of the balance sheet.
Total resources could easily breach P700 billion this year, he said. Last year, Union Bank’s balance sheet stood at P622.1 billion, marking an 18.6-percent annual growth.
Lending activities are projected to sustain a growth of 25 percent this year, much faster than the industry pace. In December, bank lending in the country grew by some 19 percent.
Consumer and small businesses now account for 70 percent of Union Bank’s revenue but by volume, they account for slightly less than 50 percent. The higher revenue contribution reflects the higher margins from these segments, Bautista said.
Asked whether Union Bank would need to raise fresh capital anytime soon, Bautista said the bank could sustain its growth without any capital hike due to high margins enjoyed by thrift banking arm City Savings.
“If you’re growing on the consumer side, you’re getting a bigger bang for your buck. You don’t need as much capital as the bigger banks,” he said.
Over the long run, Bautista said Union Bank would like to have its loan portfolio mix equally divided into three parts: consumer, small and medium enterprises and corporate books.
The bank also aims to maintain at least 13 percent return on equity (ROE) annually. Last year, ROE stood at 12.4 percent.
Union Bank posted a net profit of P8.41 billion last year, down by 16 percent, in the absence of extraordinary securities trading gains that buoyed earnings in the previous year. Excluding one-time gains from securities trading, Union Bank’s core income for 2017 was up by a hefty 30.4 percent year-on-year to P8.2 billion.
Any weakening of the peso against the US dollar will actually improve the profit and loss statement of banks with foreign currency deposit unit (FCDU) books as every peso depreciation increases the balance sheet, Bautista said.
However, any local currency depreciation will not be good for clients who are importers. Over the years, however, Bautista noted that banks have curbed lending in US dollar denomination.
Union Bank, which deems itself as a bank and technology company rolled into one, is aggressively pursuing a digital transformation. It has launched EON Digital Bank, the first with selfie-banking feature in Asia and the Union Bank mobile app and web versions with enhanced transactional capabilities. It also launched its concept branch, “The Ark” at the Insular building along Ayala Avenue, that introduced the future of branch banking in the country.—DORIS DUMLAO-ABADILLA